Employers Say Cullen Gives With One Hand...

Employers And Manufacturers Say Cullen Gives
With One Hand Takes With The Other

By Michelle
King

Businesses will not benefit from the
2007 budget as the Government gives with one hand and takes
with the other.

The Government was praised for the
business tax reductions outlined in the budget. However the
employer contributions for the KiwiSaver scheme, which is
compulsory for employers to offer, will in effect cost
companies more than the tax cut received.

“Making
employer contributions compulsory to KiwiSaver will cost
companies more than the three cents tax rate cut they are
getting,” says Alasdair Thompson, chief executive of the
Employers & Manufacturers Association

Mr Thompson says
every time company tax rates have been cut in the past, the
tax take from business actually increased. He says making it
compulsory for an employer to contribute to an employee’s
KiwiSaver account is a bold change to the KiwiSaver scheme
as originally proposed and this compulsion is unfair and
intrusive.

“As National's John Key said, Cullen has
taken $2 billion off businesses for KiwiSaver and given back
$1 billion, most of it in the form of increased Government
spending,” says Mr Thompson.

However,
Rt Hon Helen Clark prime minister at the Auckland Chamber of
Commerce post budget luncheon said that the budget has large
and overwhelmingly positive implications for business.

“It delivers the first reduction in the corporate tax
rate since the fourth Labour Government’s reduction in
1988. And it does much else besides that to boost economic
growth and development,” says Ms Clark.

The business
tax reform will allocate $3.4 billion to promote research
and development. However, in order for businesses to qualify
they are required to contribute at least $20,000 to research
and development initiatives.

Michael
Barnett, chief executive of the Auckland Chamber of
Commerce, says that while research and development is
important for fostering business and economic innovation and
growth many small to medium size businesses do not have the
finances available to participate in the Government’s
initiative.

“It’s a good thing, but the scheme’s
detail requiring a point of entry for companies to spend
$20,000 themselves will be too high for many,” says Mr
Barnett.

While Mr Thompson agrees that providing a tax
break and support to businesses for research and development
is positive, the Government could have allowed for larger
tax cuts.

“Most of the long list of extra Government
spending would be better channelled into a bigger tax rate
cut,” says Mr Thompson

In addition to large businesses,
there are 300,000 small to medium size businesses in New
Zealand which employ 20 people or less and they have not
been included in the tax cuts outlined in the 2007 Budget,
as they operate as sole traders or partnerships. More
...2

“There is a part of the economy that doesn’t
stand a show of benefiting. 40 per cent of small to medium
size businesses” says Mr Barnett.

“The Budget's three
cents reduction in the company tax rate to 30 cents in the
dollar is welcome but not bold or imaginative enough.
Overall, the Budget delivered a long list of increased
Government spending rather than tax cuts." says Mr
Thompson.

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